FOMC Minutes: Well-balanced discussion between committee members – Deutsche Bank

In view of analysts at Deutsche Bank, it felt like neither rain nor shine in the FOMC minutes last night and instead they saw a relatively well balanced discussion between committee members.

Key Quotes

“The focal point was the chatter around the balance sheet normalization process with the text revealing that “several preferred to announce a start to the process within a couple months” however also “some others emphasized that deferring the decision until later in the year would permit additional time to assess the outlook for economic activity and inflation”. So that suggested a bit of a divide amongst committee members.”

“Other interesting aspects of the minutes included some concern about easing financing conditions. Indeed it was highlighted that “some participants suggested that increased risk tolerance among investors might be contributing to elevated asset prices more broadly; a few participants expressed concern that subdued market volatility, coupled with a low equity premium, could lead to a build-up of risks to financial stability”.”

“On inflation the main takeaway was “Most participants viewed the recent softness in these price data as largely reflecting idiosyncratic factors, including sharp declines in prices of wireless telephone services and prescription drugs, and expected these developments to have little bearing on inflation over the medium run”. Our US economists expect the Fed to likely take a pause on its rate hiking cycle in September and begin the process of balance sheet normalization at that meeting.”